A Monetary Theory with Non-degenerate Distributions

Guido Menzio, Shouyong Shi and Hongfei Sun

Working Papers from University of Toronto, Department of Economics

Abstract: We construct and analyze a tractable search model of money with a non-degenerate distribution of money holdings. Analytical tractability comes from modeling decentralized exchange as directed search, which makes the monetary steady state block recursive. By adapting lattice-theoretic techniques, we characterize individuals' policy and value functions, and show that these functions satisfy the standard conditions of optimization. We prove that a unique monetary steady state exists and provide conditions under which the steady-state distribution of buyers over money balances is non-degenerate. Moreover, we analyze the properties of this distribution.

Keywords: Money; Distribution; Search; Lattice-Theoretic. (search for similar items in EconPapers)
JEL-codes: C6 E00 E4 (search for similar items in EconPapers)
Pages: Unknown pages
Date: 2013-08-17
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Related works:
Journal Article: A monetary theory with non-degenerate distributions (2013)
Working Paper: A Monetary Theory with Non-Degenerate Distributions (2011)
Working Paper: A Monetary Theory With Non-degenerate Distributions (2011)
Working Paper: A Monetary Theory with Non-Degenerate Distributions (2011)
Working Paper: A Monetary Theory with Non-Degenerate Distributions (2010)
Working Paper: Monetary Theory with Non-degenerate Distributions (2009)
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